Proposal would set threshold higher for largest credit unions supervised by special office

Credit unions with $15 billion and more in assets would be subject to supervision by a special office of their federal regulator that supervises large federally insured credit unions (FICUs) under a proposal issued Thursday by the regulator.

Voting unanimously, the three-member National Credit Union Administration (NCUA) Board issued the proposal for a 60-day comment period. Specifically, the proposal would shift the threshold for supervision for the large credit unions by the agency’s Office of National Examinations and Supervision (ONES) from $10 billion to $15 billion.

Credit unions with less than $15 billion in total assets not now supervised by the ONES office would remain subject to supervision by the appropriate regional office of the agency, the proposal states. However, those credit unions that are now overseen by ONES “would remain subject to supervision by ONES,” the proposal states. The proposal would also not alter any regulatory requirements for covered credit unions, the NCUA said.

The proposal only affects large “natural-person” or consumer credit unions, not “corporate credit unions,” which serve credit unions as a type of “bankers’ bank.”

The agency indicated it was making the proposal in response to brisk asset growth by the very large credit unions, as opposed to smaller ones, during the coronavirus crisis.

“Many FICUs have experienced significant balance sheet growth as a result of the COVID-19 Pandemic and the corresponding policy response,” the NCUA wrote in the proposal. “For example, FICUs with just below $10 billion in total assets incurred balance sheet growth of about 14% on average during the COVID-19 Pandemic, and in one case more than 34%. In contrast, FICUs with assets just below the $10 billion threshold had an average asset growth of only 9% in 2019.”

The agency noted that eased asset-size thresholds for reporting purposes (adopted in response to the pandemic as assets mushroomed at credit unions) expire in March. The impact of the eased asset thresholds was that no FICU was transitioned to ONES supervision for calendar year 2022, even if the FICU had $10 billion or more in total assets as of March 31, 2021, the NCUA said.

The agency asserted that unless the threshold is changed (to $15 billion, for example), at least nine new FICUs will meet or exceed the $10 billion threshold and would be subject to supervision by ONES starting Jan. 1, 2023.

However, the agency wrote, it does not believe that altering the threshold for ONES coverage will result in undue risk to the credit union savings insurance fund, the National Credit Union Share Insurance Fund (NCUSIF).

In other action, the board approved, also unanimously, an interim final rule extending two temporary changes to the NCUA’s prompt corrective action (PCA) regulations. The first waives the earnings retention requirement for any credit union that is adequately capitalized. The second modifies the agency’s rules with respect to net worth restoration plans. The extensions were initially made in 2020 and 2021 to help ensure that FICUs remain operational and liquid during and following the COVID-19 crisis. The rule has a 60-day comment period.

Notice of Proposed Rulemaking, Parts 700, 701, 702, 708a, 708b, 750, and 790, Asset Threshold for Determining the Appropriate Supervisory Office

Interim Final Rule, Part 702, Prompt Corrective Action